In the life sciences industry, there are pharmaceutical, specialty pharmaceutical, biotechnology, medical device, biopharmaceutical companies and others that are required to perform clinical trials. Clinical trial data and information is submitted to the U.S. Food and Drug Administration and/or a foreign counterpart to gain approval for a new product. This type of product development is complex and expensive because many different suppliers across the globe may be needed to perform even a single trial. The process for managing payments to suppliers for the products and services that are contracted is also complex. Some reasons for the complexity are that the process often requires the life sciences company, known as the “sponsor” of the trial, to use many different suppliers and perhaps their own resources, in combination, and because the supplier billing staff does not know what work has been done by others elsewhere in their company, in other parts of the U.S. or across the globe. There are two major processes that are performed in order to invoice and then pay appropriate invoices for work/deliverables completed. (“Deliverables” refer to the goods and services that need to be provided to perform a clinical trial study. The deliverables include goods and services provided at patient sites, as well as sites remote from the patient sites, such as lab and diagnostic sites, or sites where investigators perform services.)
On the supplier side, there are many issues in connecting the number of billable hours with the activity related to the deliverable that was accomplished. This makes it difficult for a supplier to provide the exact number of deliverables that were completed. Sometimes a supplier cannot distinguish between their own charges that can be invoiced for work completed and the charges of the supplier's subcontractors, known as pass-throughs. This might happen because the supplier does not wish to identify these items and their prices on an invoice. This process is the source of numerous, expensive errors. Bills and invoices that suppliers create often contain duplicate charges, missed charges, and other mistakes that the supplier and their subcontractors may not realize. However, the sponsor of the trial needs to know all details in order to understand several important cash flow matters. For example, a sponsor cannot continue to receive invoices for two years after the trial has been concluded, because it is near impossible to verify these late invoices and deem them as appropriate, long after the project has been performed and completed.
Currently, each supplier is only concerned with their own individual costs and their associated invoices sent to a sponsor. However, the sponsors need to know, for any time period, which remaining invoices will be coming to them or where the current spend is, in comparison to the total budget. They also need to know if the projections for cash requirement have increased or decreased.
On the sponsor side of the process, the sponsor must account for all the money that is spent by all of the suppliers, their subcontractors, and anyone else who is spending money on the clinical trial. The sponsor is responsible to take receipt of, track and manage, and pay appropriate invoices from the right suppliers, for work done in the clinical trial. This process is the source of numerous, expensive errors. Bills and invoices from suppliers may represent duplicates, erroneous charges, and other mistakes that neither the supplier, nor the sponsor may discover. These errors make clinical trials costly and result in higher costs for patients and their families, many of whom cannot afford new medical products.
As a result of the inability to accurately manage invoice payments, pharmaceutical companies often make millions of dollars of erroneous payments each year. Furthermore, without appropriate payments for products and services, valuable vendors might not receive payment for products and services and may no longer be in business to serve the clinical research needs of the life sciences industry. Without appropriate payments, the cost of drug development will continue to rise, making it difficult for people to afford important medications. In addition, the proper accounting of money that is spent on a particular project will provide warning signals that a clinical trial no longer is compliant with the plan for the trial.
Although the biotechnology company and the suppliers may carefully document the activities and the costs associated with the activities, it is difficult and time consuming to decide if an invoice is appropriate for payment. In truth, payment should not be made until it is verified that related deliverables are appropriate for the trial. It is not easy for financial staff to determine appropriateness, because of their lack of clinical knowledge and expertise. Likewise, it is not easy for clinical staff to determine appropriateness because of their lack of financial information about the costs and timing associated with the many different contracts. Since there are multiple suppliers that will deliver services for a clinical trial, and all have different contracts, confusion and payment errors can quickly become expensive if there is no integrated process and/or the integration of appropriate information.
In order to try to reduce the confusion and errors, some biotechnology companies have implemented clinical trial management systems. However, the clinical trial management systems have not been successful in reducing erroneous payments because these systems lack an integrated combination of business rules, formulas and timing knowledge to flag potentially erroneous payments. These clinical trial management systems also lack the near real-time visibility regarding the work and deliverables that have actually been completed. These systems contain only what has been data-entered into the system, making it still necessary to find the data. In addition, these clinical trial management systems do not tie into the objectives of the sponsor to track that the monies spent and activities done actually resulted in the right deliverables.